Downtown HCMC proving increasingly elusive for apartment developers

Land shortage and increasing congestion are major dampeners on apartment development in central HCMC, industry insiders have said.
According to property consultancy DKRA Vietnam, in the third quarter of this year a total of 18 apartment developments came into the market with 7,152 units.

Of this number Districts 1, 3, 4, 10, and a part of District 5 only contributed 805 units, or 11 percent.

In the last three quarters these areas accounted for only 8.1 percent of the total new supply in the city, with 2,159 units.

DKRA Vietnam’s director of research and development, Nguyen Hoang, said this was due to the fact that “clean” land – referring to land already cleared for construction — in the city centre is fast becoming scarce.

It is not easy to free up land either due to the very high costs involved, he pointed out.

“If investors are able to acquire land in District 1 or central HCMC, they usually develop high-end, luxury apartments.”

Concurring with this, Nguyen Tien Dung, general director of Sai Gon Trien Vong Ltd. (Savista), said trade space and office developments would be more profitable than housing in the city centre.

Besides, because of the high population density in the core areas of the city, urban planning authorities tend to discourage large-scale housing projects there, he explained.

Even if developers build apartments in the downtown areas, there is little space left for facilities and amenities that would increase the value of the project, Dung said.

“In contrast, in suburban projects, investors could afford to use 60-70 percent of the total area for lakes and greenery.”

But while inner city residents can easily find amenities such as swimming pools, shopping malls and gyms in their neighbourhood, parking space is the real problem, he pointed out.

“With the high prices and scarcity of land, providing parking space is a headache. It is difficult to meet the needs of residents and greatly inflates prices.”

Even some high-priced luxury apartment developments in the downtown areas are incapable of providing parking space for all its occupants.

Earlier this year many residents of an apartment complex voiced their discontent against the developer for not providing parking space.

Despite the high prices they paid, they had to take part in a lucky draw to be allotted a parking spot. Those who lost had to find space elsewhere or pay for parking.

Average parking fees in the city could go up to VND1.5 million ($64.60) per month, or range from a few hundred million dong to a billion ($43,050) for buying a spot outright.

The city has eight million registered vehicles, up 70 percent from 2010, including nearly 1 million cars. According to its plans, HCMC’s 930 ha central area should have eight underground public parking lots, but none has been built so far.

Experts believe that with the current parking space crisis will be a major competitive advantage in downtown projects and one of the key determinants in the purchasing decision.

For instance, Novaland Group’s mixed-use development Grand Manhattan has drawn a lot of attention after the company announced a special offer of a car parking slot for every apartment.